In medium pan, combine 1 1/2 cup milk and pudding mix. Cook as directed on packet. Add chocolate chips and stir until melted. Set aside.
Preheat oven to 180 degrees C. Grease and flour a ring tin.
In large bowl, combine sugar, butter and margarine. Beat till light and fluffy. Add vanilla and eggs. Mix well.
Add flour, 1/2 cup cocoa, baking powder, salt and 1 cup (250ml) milk to bowl. Beat at low speed until moistened. Beat 3 minutes at medium speed. Stir in walnuts.
Reserve 2 cups of the batter. Pour remaining batter into greased and floured tin. Spoon filling in ring on top of batter, making sure it does not touch sides of pan. Spoon reserved batter over filling.
Bake for 50 to 60 minutes or until cake springs back when touched lightly in centre. Cool 1 hour in pan, then turn out onto a wire rack and cool completely.
In small bowl, combine icing sugar and 1/4 cup cocoa. Add enough milk for desired drizzling consistency. Spoon over top of cake, allowing some to run down sides.